Does Fairtrade Really Promote Business Ethics?

Introduction

Fairtrade is a brand name that promotes an ethical business strategy. The owner of the company, the Fairtrade Foundation, convinces customers to provide fair pricing, treat customers fairly, and donate money to producers in poor countries (Griffiths, 2012). Despite claims that the model promotes market equity, its financial effects on disadvantaged producers demonstrate that it is incapable of delivering the promised benefits.

Critical Assessment

After the commodity’s global price collapse in the 1980s, major problems among Mexican coffee producers led to the formation of Fairtrade. On the global market, demand and supply for the product were in equilibrium until 1989. However, since the late 1980s, falling prices and unfair competition have presented difficulties for farmers in developing nations (Fairtrade Foundation, 2019). In an effort to restore order to the global coffee market and assist farmers in overcoming the effects of poverty, the system was developed.

Fairtrade’s mission is one of its justifications. The purpose of the business model is to create a society in which farmers and workers are compensated fairly for their efforts. The system strives for global business responsibility. Many manufacturers live in poverty despite their desire to export their goods, particularly in third-world nations. Fairtrade entails actions to ensure fair contracts for manufacturers. Despite their efforts, producers remain at a competitive disadvantage due to low prices; the program helps them overcome this disadvantage.

Research and commissioned studies indicate that fair trade has a significant economic impact. The literature review conducted by Nelson and Pound (2009) demonstrated the financial benefits of Fairtrade for smallholder farming households that can form producer groups and export products meeting the required specifications. The approach generates greater returns and more consistent profits than a conventionally competitive economy.